I am fully supporting modifying the staking contract so that only fixed ranges are rewarded.
However, enforcing fixed ranges is too limiting and may cause issues down the line (read my previous post discussing this here). Here’s why:
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First, even if 1000-10,000 look reasonable now, there is still a ~9% chance that the price will end either above 10,000 or below 1,000 after 3 months. What happens after ETH goes up by 3x and the incentivized liquidity dries up? Most liquidity will not be used, pool volume will drop, and LPs will not collect rewards.
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Second, the current (1000, 10000) range is centered around sqrt(1000*10000) = 3162, meaning that users will have to deploy ~1.7x more stablecoin than ETH in absolute value when entering the position at the current price. That could cause problems because users would need to transfer 2 assets to L2 just to be able to participate.
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Third, the proposed range of (1000, 10000) may be too large. While (1000, 10000) is still ~2.3x more capital efficient than Uni v2, it “splits” the liquidity into 384 ticks and is thus 384x less capital efficient than 1-tick liquidity. Users may feel shortchanged by being forced to use very low yield positions.
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Finally, enforcing a fixed liquidity range may be counterproductive for many LPs. Users may still want to be more directional when providing liquidity or may want to re-adjust after large price moves, keeping a wide but fixed range prevents that from happening.
I suggest that the staker contract only rewards LP positions that are in range AND above a specific width (ie. upperTick - lowerTick > minWidth). In other words, allow users to choose the upper/lower bounds but limit the range to prevent 1-tickers.
The value of minWidth could still be capped at the 1sd expected move for 3 months (about +/- 33%) or whatever the governance votes on.
Providing liquidity in Uni v3 should not be a “set it and forget it” strategy, nor should it be a “rebalance every minute” strategy either. Overall, implementing a minWidth criteria will allow users to be rewarded in a manner that is directly proportional to their amount at stake as long as their position is “active” while allowing them to be strategic in their LPing.
What you may not want to see happening is users “forgetting” about their liquidity and end up with pools with large TVLs but barely any liquidity at the current tick.
Example, the ETH-MKR-0.3% pool:
Also, speaking of Maker, has UNI governance thought about minting Dai against their billion dollar treasury and deploy it to DAI-UNI pools on Layer 2? That would be one way to solve the stablecoin bottleneck on L2s and help provide some utility to the UNI token on layer 2 (or on Mainnet).